- Can Huge Flaws in Financial Bill Be Fixed by Barney Frank in Conference? Gretchen Morgenson, NY Times, May 30, 2010
Morgenson tells us what the many Financial Lobbyists have done to weaken the Financial Bill in the details which gives them crucial exclusions and exceptions on derivatives trading so Wall Street can by-past the stated regulation intent of the bill.
… Certainly the banks and the Wall Street trading shops that have so richly scored in the derivatives market are happy to keep the status quo — after all, profits flourish where opacity rules. But for most of the rest of us that’s an unsatisfactory, and possibly dangerous, outcome.
Despite their ubiquity and the pivotal role they play in modern finance, many derivatives don’t trade openly on exchanges as stocks and other instruments do. When an institution buys a derivative like a credit-default swap, for example, to protect itself against the default of an investment like a bond, that transaction is a private contract, struck between it, the seller and perhaps an intermediary, like a bank.
Because private transactions like these can mask big and risky exposures in the markets (think American International Group), financial reformers decided to make derivatives trading more transparent, which is a good thing. Both the Senate and House bills require standardized derivatives to be traded on an exchange or a swap execution facility.
But the devil is always in the details — hence, two 1,500-page bills — and problems arise in how the proposals define what constitutes a swap execution facility, and who can own one.
Big banks want to create and own the venues where swaps are traded, because such control has many benefits. First, it gives the dealers extremely valuable pretrade information from customers wishing to buy or sell these instruments. Second, depending on how these facilities are designed, they may let dealers limit information about pricing when transactions take place — and if an array of prices is not readily available, customers can’t comparison-shop and the banks get to keep prices much higher than they might be on an exchange.
Nobody lets auto dealers, airlines, hardware stores or an array of other businesses sell their wares without a price on the window, the ticket or the tag, but Wall Street is still getting away with obscuring prices in the derivatives market.
To resolve problems that might arise from derivatives dealers controlling trading facilities, the House bill bars them from owning more than 20 percent of a swap facility. The Senate bill, however, has no such limitations.
It is unclear, therefore, what the final bill will allow on this crucial matter. What is certain is this: Banks will lobby hard to be allowed to own swap facilities. …
Initially, the Senate bill’s discussions of derivatives platforms defined them as “trading” facilities, a term of art from the Commodity Futures Modernization Act of 2000. In that law, a trading facility refers to a system in which multiple participants place bids and offers and in which price transparency exists both before and after a trade is made. Such a definition usually excludes making deals over the telephone because negotiating on the phone may not provide access to as many different prices as an exchange does.
But the word “trading” was eventually struck from the final Senate bill’s definition of derivatives platforms. That change would allow dealers to make derivatives deals over the phone, hardly a victory for transparency. Dealers love trading by phone because it makes it harder for customers and investors to see prices and comparison-shop, which, of course, bolsters dealer profits.
Because the House bill never specifically took on the issue of “trading” facilities, it is unlikely that the reconciliation of the two proposals will bring back this important distinction — leaving derivatives trading more opaque than it should be. … http://www.nytimes.com/2010/05/30/business/30gret.html?ref=global
- BP Memos Detail Early Concern About Rig’s Safety Ian Urbina, NY Times May 29, 2010
… The problems involved the well casing and the blowout preventer, which are considered critical pieces in the chain of events that led to the disaster on the rig.
The documents show that in March, after several weeks of problems on the rig, BP was struggling with a loss of “well control.” And as far back as 11 months ago, it was concerned about the well casing and the blowout preventer.
On June 22, for example, BP engineers expressed concerns that the metal casing the company wanted to use might collapse under high pressure.
“This would certainly be a worst-case scenario,” Mark E. Hafle, a senior drilling engineer at BP, warned in an internal report. “However, I have seen it happen so know it can occur.”
The company went ahead with the casing, but only after getting special permission from BP colleagues because it violated the company’s safety policies and design standards. The internal reports do not explain why the company allowed for an exception. BP documents released last week to The Times revealed that company officials knew the casing was the riskier of two options.
Though his report indicates that the company was aware of certain risks and that it made the exception, Mr. Hafle, testifying before a panel on Friday in Louisiana about the cause of the rig disaster, rejected the notion that the company had taken risks. … http://www.nytimes.com/2010/05/30/us/30rig.html?scp=1&sq=BP%20Documents&st=Search
- Campaign by Food Corporations to Prevent Regulations on Abundant Salt and High Fructose Corn Syrup sugar Used in All Our Prepared Foods, the Mainstay Diet of Most Americans and Their Families: Obesity and High Blood Pressure Targeted Michael Moss NY Times May 29, 2010,
The Big Five Food Corporations such as Cargill, ConAgra, and various product companies use a combination of salt and high fructose Corn Syrup to enhance the flavor of foods rather than using more expensive spices and fresh food ingredients. They are acting similarly to the tobacco companies by saying their products are safe for consumption when overwhelming data show otherwise.
I found that by not drinking fruit juices and otherwise limiting the consumption of high fructose food sources, I have been able to consume more salt without putting my blood pressure through the roof. Too much fructose kills our cells, produces low density lipoproteins, triglycerides, and the DNA and other products from dead cells are turned into uric acid. Recent research has shown unequivocally that uric acid inflames our blood vessels preventing it from expanding to reduce our circulation and resulting in high blood pressure.
In addition, it is metabolized similarly to alcohol in the liver to cause a cross-linking of tissues and DNA which results in cirrhosis of the liver and likely the rest of our body. This is called the aging process or glycation which also occurs with regular sugar or cane sugar, but not as efficiently.
Michael Moss: … By all appearances, this is a moment of reckoning for salt. High blood pressure is rising among adults and children. Government health experts estimate that deep cuts in salt consumption could save 150,000 lives a year.
Since processed foods account for most of the salt in the American diet, national health officials, Mayor Michael R. Bloomberg of New York and Michelle Obama are urging food companies to greatly reduce their use of salt. Last month, the Institute of Medicine went further, urging the government to force companies to do so.
But the industry is working overtly and behind the scenes to fend off these attacks, using a shifting set of tactics that have defeated similar efforts for 30 years, records and interviews show. Industry insiders call the strategy “delay and divert” and say companies have a powerful incentive to fight back: they crave salt as a low-cost way to create tastes and textures. Doing without it risks losing customers, and replacing it with more expensive ingredients risks losing profits.
When health advocates first petitioned the federal government to regulate salt in 1978, food companies sponsored research aimed at casting doubt on the link between salt and hypertension. Two decades later, when federal officials tried to cut the salt in products labeled “healthy,” companies argued that foods already low in sugar and fat would not sell with less salt.
Now, the industry is blaming consumers for resisting efforts to reduce salt in all foods, pointing to, as Kellogg put it in a letter to a federal nutrition advisory committee, “the virtually intractable nature of the appetite for salt.”
The federal committee is finishing up recommendations on nutrient issues including salt. While its work is overseen by the Department of Agriculture, records released to The New York Times show that the industry nominated a majority of its members and has presented the panel with its own research. It includes two studies commissioned by ConAgra suggesting that the country could save billions of dollars more in health care and lost productivity costs by simply nudging Americans to eat a little less food, rather than less salty food.
Even as it was moving from one line of defense to another, the processed food industry’s own dependence on salt deepened, interviews with company scientists show. Beyond its own taste, salt also masks bitter flavors and counters a side effect of processed food production called “warmed-over flavor,” which, the scientists said, can make meat taste like “cardboard” or “damp dog hair.”
Salt also works in tandem with fat and sugar to achieve flavors that grip the consumer and do not let go — an allure the industry has recognized for decades. “Once a preference is acquired,” a top scientist at Frito-Lay wrote in a 1979 internal memorandum, “most people do not change it, but simply obey it.”
In recent months, food companies, including Kellogg, have said they were redoubling efforts to reduce salt. But they say they can go only so far, so fast without compromising tastes consumers have come to relish or salt’s ability to preserve food. “We have to earn the consumer’s trust every day,” said George Dowdie, a senior vice president of Campbell Soup. “And if you disappoint the consumer, there is no guarantee they will come back.” … http://www.nytimes.com/2010/05/30/health/30salt.html?scp=2&sq=Salt&st=cse
